So what does the payroll tax mean for you ? Well for one thing it means a bigger paycheck on payroll, money that you can actually see when you open look on your stub.
It came about in December 2010, when President Barack Obama worked along side his Republican colleagues to implement it to the dismay of some Democrats about payroll. The tax cut reduced its tax and the Social Security withholding tax from 6.2% down to 4.2%. This money is withheld from your pay check to pay for the Social Security programs. If you would like to find out what programs it funds take a look here.
I don’t know the reason they wait until the last minute to extend the deal. This is an election year and could prove catastrophic to the elected officials should they decide to let it expire and do nothing. Don’t worry they likely won’t let it expire. They are just trying to get it back in the public eye to let you know what your congressman/congresswoman is doing for you.
The tax cut puts roughly $1,000 dollars back into your pocket on an annual basis assuming you make close to $50k. I am all for cuts that put money directly back into my pocket. This is money that you can see every week. This blog is about personal finance so make sure you put that money to good use! This is your get out of debt free card, toss that extra grand a year to your credit cards or other debt that you have.
How much money would you stand to lose if they let the tax expire? Here is a simple quick calculation from Kiplinger to give you a good figure. Social security is only taxable up to the first $110,100 in income.
What would you do with that extra $1,000 grand a year? I’ll give out my address if you aren’t going to do anything with it.